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A year ago
Foley Products Company makes a household appliance with model number X500. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of X500 units that can be produced. The industry market size for appliances increased 10% from 2017 to 2018. The following additional data are available for 2017 and 2018:

20172018
Units of X500 produced and sold16,00017,600
Selling price$140$133
Direct materials (square feet)36,00035,000
Direct material costs per square foot$10$13
Manufacturing capacity for X500 (units)12,50011,800
Total conversion costs$350,000$330,400
Conversion costs per unit of capacity$28$28

What is operating income for 2017?
A) $1,530,000
B) $2,240,000
C) $1,890,000
D) $1,880,000
Textbook 
Cost Accounting: A Managerial Emphasis
Edition: 16th
Authors:
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Posts: 143
A year ago
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 A
Explanation:  ($140  16,000) - [($10  36,000) + ($28  12,500)] = $1,530,000
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